In a significant legal development, the Supreme Court of India recently ruled on a case involving the rectification of a mistaken bid in a tender process. The case highlights the importance of balancing equity in tender matters and ensuring fairness for all parties involved. The judgment addresses concerns raised by the parties regarding the bidding process and the consequences of bidding errors. Stay informed about this crucial decision that impacts the realm of commercial transactions and tender procedures.
Facts
- The appellant, in a bidding process for the Orahuri Manganese & Iron ore block, mistakenly entered a bid of 140.10% instead of the intended 104.10% after 136 attempts.
- Despite attempts to rectify the mistake, the first respondent rejected the request due to the e-auction process being completed.
- The appellant had followed all necessary procedures including submitting the required fees and Bid Security as per the tender document.
- The Mineral Auction Rules, 2015, outline a two-round process for bidding, with the last highest bid prevailing as the winning bid.
- The appellant was declared as the Preferred Bidder with a bid of 140.10%, which was accepted as the final price offer.
- Subsequent requests for rectification of the bid were made by the appellant but were not entertained due to the completion of the e-auction.
- Appellant enhanced the prevailing bid 47 out of 137 times during the bidding process.
- Appellant mistakenly entered a bid of 140.10% instead of 104.10% due to human error in the 137th attempt.
- The minimum bid increment required was 0.05% as per the tender document.
- No reasonable businessman would submit a bid of 140.10% when the prevailing highest bid was 104.05% with a minimum required increment of 0.05%.
- The bidding process mostly adhered to the minimum increment of 0.05%.
- Appellant claimed the bid of 140.10% was a genuine mistake and sought to re-commence the e-auction process for the mining lease.
- High Court dismissed the writ petition stating that the appellant admitted to making a bid of 140.10% and must be bound by it.
- Appellant contested the High Court judgment in the present appeal.
- Appellant’s counsel argued that in a 7-hour bidding period, bids only increased by 20.05% from 84.00% to 104.05%.
- The e-auction platform did not provide any mechanism to rectify bidding errors.
- Appellant faced a threat of forfeiture of the security deposit and upfront payment for failing to rectify the bid made in error.
Also Read: Judgment Summary: Balancing Equity in Commercial Contracts – Original Name v. State
Arguments
- The appellant complied with the formality required in the e-auction process, according to the respondents.
- The respondents pointed out that the appellant cannot claim an error in bidding after submitting a bid of 140.10%.
- Additional information provided by the first respondent explained the process of placing a bid on the e-auction platform.
- Once a bid is entered and authenticated with a Digital Signature Certificate, it is recorded by the system.
- The respondents argued that the e-auction process had been finalized and could not be reopened due to the appellant’s claim of mistake.
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Analysis
- The court has cautioned against excessive interference in contractual or commercial matters.
- Holding the appellant accountable for an extravagant bid made in error would be unconscionable.
- The court finds that the appellant did not enhance their bid to take undue advantage.
- The doctrine of non-traverse applies as the respondents did not specifically deny the appellant’s averments.
- Enforcement of a commercially unviable bid with forfeiture hanging over the appellant is deemed punitive.
- The court emphasizes the importance of balancing the interests of the government and private entities in tender matters.
- It is observed that the e-auction was a competitive process requiring caution.
- The appellant’s inability to rectify a human error due to system constraints is acknowledged.
- The court finds the punishment of forfeiting the security deposit disproportionate to the error made.
- The doctrine of proportionality is considered in evaluating the appellant’s situation.
- The appellant’s genuine intent to rectify the mistake is evident from prompt actions taken post-auction.
- The appellant had no recourse to rectify the bid due to system limitations, leading to a difficult decision.
- The appellant acted promptly upon discovering the mistake, indicating inadvertent error.
- The principles of proportionality, reasonableness, and equity support hearing the appellant’s grievance.
- Rule 20 of the MA Rules allows rectification of mistakes only for governmental orders, not bids.
- Bidders are expected to exercise a high degree of care in tender processes.
- Courts are cautious in interfering in contractual matters unless clear arbitrariness or bias is demonstrated.
- Equitable relief can be sought in cases of mistake in bids, provided the bidder acted promptly and with diligence.
- The doctrine of proportionality requires a fair and balanced decision-making process.
- Negligent mistakes in bid documents cannot be corrected based on equity.
- The present case is distinguishable from a previous case due to specific facts.
- Proportionality in administrative decisions requires honoring policies, fairness, and personal consideration.
- The doctrine of proportionality involves a balancing test and a necessity test to ensure rights are not unduly infringed.
- Judicial review of administrative actions must consider the least restrictive alternative when rights are infringed.
- Whether forfeiture of security deposit of Rs. 9,12,21,315/- is in the form of penalty or liquidated damages was not delved into in the present matter.
- The court decided not to determine the issue to bring the matter to a conclusion.
- In the interest of equity and under Article 142 of the Constitution, specific orders were passed to maintain balance between the State and the appellant.
- The impugned communication issued by the State was quashed by the court.
- Liberty was confirmed for conducting a fresh e-auction if not already done.
- A human error was acknowledged, indicating a level of carelessness that could cost the public exchequer significantly in terms of time, effort, and expense.
Also Read: Legal Analysis on Transferability of Contractual Obligations
Decision
- The judgment and order in question has been set aside due to the appellant’s lack of necessary care, causing delays and financial losses to the respondents and other bidders.
- The appellant is directed to pay Rs 3,00,00,000/- to the first respondent within a month.
- An additional Rs.25,00,000/- is to be spent on charitable purposes for the development of young tribal population in the mining district.
- Failure to make the payment will result in encashment of the bank guarantee provided by the appellant.
- A previous interim order had allowed the respondents to conduct a fresh e-auction.
- Payment of Rs 3,00,00,000/- within the specified timeframe will lead to cancellation of the bank guarantee.
- Out of the payment made, Rs.2,75,00,000/- will be used for various purposes including covering revenue loss and expenses for e-auction processes.
Case Title: M/S OMSAIRAM STEELS AND ALLOYS PVT. LTD. Vs. DIRECTOR OF MINES AND GEOLOGY,BBSR (2024 INSC 520)
Case Number: C.A. No.-007812-007812 – 2024
